The Case: Containing inflation is not easy and stabilizing prices of essential food items is even more difficult.

In Pakistan, effective monitoring of food prices is nowhere in sight. Repeated warnings by officials against profiteering fall on deaf ears. When supplies are disrupted, prices move up. Food inflation peaked in FY11 to 18% against aggregate CPI inflation of 13.7% because in that year, super floods had washed away pulses, vegetables and other minor food crops and wrecked farm to market transportation. Sowings and harvests of wheat, rice, maize and sugarcane were also hit. The very next year, food inflation equaled overall inflation of 11% as supplies had improved after increase in crop harvests and improvement in logistics. In the last fiscal year too, food inflation of 7.4% was slightly higher than the general inflation of 7.1%. But in six months of the current fiscal year, increase in food prices has been higher than increase in CPI inflation as a whole, 9.9% against 8.9%. According to latest inflation report of State Bank of Pakistan (SBP), prices of 17 out of 20 food items went up in December with year-on-year increase ranging between 2% in case of sugar, to 78% in case of onions. Reports of previous five months had painted almost identical picture of prices of essential food items. According to Pakistan Bureau of Statistics (PBS), food inflation in small towns and villages rise faster than in major cities, it essentially means supplies are really scant. It also means that in the given period, cost of transportation of some food items from cities to rural areas has been higher than intra-city transportation cost. There is even huge difference in the prices of rice, wheat flour, sugar, pulses, fish, eggs and poultry meat in various parts of the country. Retail food prices also vary among various cities and even between different markets of the same city. Some food items like vegetables, fruits and pulses show erratic changes in prices also because they are perishable. Not only Pakistan, but other countries in the region like India, China, Bangladesh and Sri Lanka have lately experienced abnormal rise in prices of onions and potatoes simply because a late or faulty assessment of crop shortage made it difficult for them to compensate supply gaps with imports. Requirement: Being a student of Economics, carefully analyze the above case and think over the factors that cause a huge difference in the prices of food items in various parts of the country. What measures should be taken in order to control the food inflation as a whole? Discuss logically. The Retail food prices vary among various cities and also between The major difference in the above case are the value add cost are much transpire that create hug variation in the price of food items in various part of the country even cities. The Prices include. These include local cost of production that is initially observed then further cost of transportation, shipment, local cost of logistic, landed cost of imported items, cost of intra-city transportation, these are the second And once the major reasons are those storage capacities of reserved food items these take too much raising to bring the price up. Once the phenomenon at the initial stage vegetable production process, it may cause to spoiled the entire productivity due to bad season due to environment is too cold, due to heavy rain, suddenly, cloudy on hot days during the cultivation of wheat. The changes in environment may damage the yield. Environment may change the productivity process of cultivation which may also hit the pricing factor to bring down or may also hit to rise suddenly. The excess or extra production of vegetable may down the price due to excess supply of production. Demand is varying on certain point not much high or not much as low it may change usability of vegetable. So the major reasons of change in price are bellow. Change in productivity or supply is the major function which may cause to change the price. Value added cost is major reason which changes the price level on area basis.

Take for example, a vast difference between prices of rice, wheat flour, sugar, pulses, fish, eggs and poultry meat in various parts of the country. The latest inflation report of PBS shows that wheat flour is selling at a price that is higher by Rs7 per kg in Quetta than its lowest price in Rawalpindi. Similarly, per kg price of Basmati broken in Quetta is Rs27.5 higher than in Bahawalpur. Huge difference, isnt it! Retail food prices vary among various cities, and even between different markets of the same city, for several reasons. These include local cost of production, landed cost of imported items, cost of intra-city transportation, size of the market and size of the population it serves, storage capacities of raw food items, inventory buildup capacities, hoarding tendencies, degree of administrative controls on prices (or the lack of it) etc.

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